BLOG MASH-UP OF THE WEEK

Everyday the blogosphere offers an enormous amount of in-depth analysis on any imaginable topic. The world ofmacroeconomics and economic forecasting is no exception. To keep themselves updated on the latest information, our in-house team of economists scan the world wide web and gather what they consider the most interesting, appealing, informative or just curious blog posts from experts in the field of global economics. Here’s the list of the Top 4 posts from this week. Check it out!

Mike Shedlock is highly critical of recent comments made by Vitor Constancio, European Central Bank (ECB) Vice President. Constancio said that he did not think that there is the risk of Europe falling into full deflation because nominal salaries would have to fall in all member countries and this cannot happen. Shedlock counters this statement with three simple points. First, even if wages and salaries rise, consumers might pay off debt rather than spend. Second, aggregate wages and salaries might drop in most member countries. Third, the advantages of inflation are grossly misstated. – Carl Kelly

In this blog post, Timothy Taylor examines the different approaches between Scandinavian countries and the U.S. to encourage labor. Taylor argues that the American approach involves keeping tax rates low to encourage people to work more, while Scandinavians use “participation subsidies”, programs that make it easier for people to work. For example, they provide child care and elderly care which frees up time for people to work and lowers the price of goods that are complements to working. Taylor concludes by speculating if low-income families in the U.S. would be better off if provided with universal institutions instead of the current tax credit. – Angela Bouzanis

Evidence of a rise in economic inequality over the past few decades has led several Nobel laureates to call for more progressive taxation. This article, “shows that these calls are justified on the ground that rising income inequality and wealth concentration contributed to both the financial crisis of 2007-09 and the sovereign debt crisis in the Euro area in complex but essential ways.” The author argues that progressive taxation and redistributive policies would lead to a more stable and productive economic environment. – Carl Kelly

In this blog post, Simon Wren-Lewis gives arguments on why are most British still worse off than before the recession, although UK GDP growth has been performing good. First, population growth is one of the reasons of the increase in GDP since 2007. However, while the level of GDP in the recent quarters was well past its 2007 peak, the level of GDP per head is well below the peak. In addition, the way GDP is distributed between wages, profits and taxes explains part of the difference between total GDP and how prosperous consumers feel. The last argument that Simon mentions is the terms of trade factor. While the price of goods we buy overseas increases relative to the price of goods produced in the UK, the people feel poor. So, although GDP may be higher than before the recession, once you take in consideration the population growth, indirect taxes as well as the terms of trade, people end up significantly poorer. – Carl Kelly